The Ministry of Justice has been working with the British Bankers’ Association (BBA) and the Consumer Credit Counselling Service (CCCS), with input from Citizens Advice (CitA) to develop a new way to help people who suffer an unexpected ‘income shock’ such as redundancy, reduced hours or illness. This initiative will allow debtors to make minimal token payments until their financial situation has recovered, where this is the best option available to them.
Under the new initiatives to be announced today:
- Banks, building societies and credit card lenders who follow the Lending Code will provide additional protection to people who find themselves in financial difficulties. Under guidance issued by the Lending Standards Board, lenders will consider reducing or freezing interest and charges. Lenders will also accept token payments where appropriate.
- The CCCS will, after Easter, introduce a new payment arrangement for consumers with at least two unsecured debts, who are unable to meet their debt repayments, allowing them to make token payments of as little as £1 per debt a month - provided they take responsibility for their debts, engage with their creditors, and pay what they can. This will show the customers’ creditors that, although they currently cannot meet their debt repayments, they are keen to repay when they can. The customer can benefit from this scheme for an initial six month period, after which they will hopefully be back on their feet financially and able to resume their debt repayments, or an alternative form of debt remedy may have to be considered.
The new package of measures by lenders was confirmed in advance of announcements to be made by the Prime Minister today, expected to include fairer rights for credit card users, low-cost access to online credit histories and other reforms designed to make the financial services industry work in the interests of consumers.
